Will International Growth Drive Costco Forward?

In today's world, most companies span several regions and sell across the world. As Foolish colleague Morgan Housel notes, 10 years ago, less than a third of S&P 500 revenue came from outside the United States. Today, more than half of the S&P 500's growth comes from overseas. And that number is growing.

The truth is, investors regularly underestimate how much demand comes from abroad. More importantly, for large, multinational corporations that have already established a presence in their home markets, much of their future growth comes from foreign markets.

With that in mind, today we're looking at Coscto (Nasdaq: COST). We'll examine not only where its sales and earnings come from, but how its sales abroad have changed over time.

Where Coscto's sales were five years ago
Five years ago time, Costco generated 81% of sales from the United States. Sales outside the United States and Canada amounted to only 6%.

Source: Capital IQ, a division of Standard & Poor's.

Where Costco's sales are today
Today, Costco's international ambitions are increasingly making an impact on the company's top and bottom lines.  

Source: Capital IQ, a division of Standard & Poor's.

Although international have moved only from 6% of total sales in 2005 to 8% today, the absolute revenue number has doubled.

Source: Capital IQ, a division of Standard & Poor's. Numbers are in millions.

Best of all, the sales surge in Canada and other international areas is leading to an uptick in profitability as these regions realize the benefits of operating leverage and scale.

Source: Capital IQ, a division of Standard & Poor's.

One final point about Costco's international growth: Its Canadian figures are amazing. Think about it this way: The United States has a population of some 300 million people, while Canada has around 35 million. That means Canada has about 11% the population of the U.S., but its Canadian stores do 20% the business of U.S. stores. Costco is getting nearly double the revenue per Canadian as it does per American. That could be partially attributable to demographic factors such as urban distribution, but you also have to give Costco credit for its ability to strongly move into the Canadian market and become a retail leader.

Competitor checkup
One last point to check is how Costco's footprint compares with some of its peers across the broader retail sector.

Source: Capital IQ, a division of Standard & Poor's.

Wal-Mart is the most aggressive of this group when it comes to emerging-market growth. The company's bargain selling prices naturally appeal to markets like China and India, and it sees a huge opportunity in these countries, though competition is stiff. Target offers investors no international exposure, and Carrefour is predominately a European operation. However, it also has a strong presence in Brazil that has grown quickly in recent years.

If investors are looking for other ideas for gaining international exposure through retail, they can look to the brands themselves. One area seeing explosive growth is luxury-brand sales to emerging markets. For example, Coach (NYSE: COH) has seen non-U.S., non-Japanese sales rise by 315% over the past five years.

Keep searching
If you're looking to stay updated on Costco or any other companies mentioned here, make sure to add them to our free watchlist service, My Watchlist. It's free, and it helps you constantly stay updated on news and analysis on your favorite companies.

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